Review Category : News

Lot Sizes on the Foreign Exchange Sydney Market

Foreign Exchange Sydney Bills

When trading on the foreign exchange Sydney market you should consider the different lot sizes available.  A lot size will play a large role in your trading, particularly in which risk management strategies can be used.  When choosing a lot size you should consider your trading requirements.  The general rule is that you use a smaller lot size; however you may prefer a larger one according to your trading needs.  In order to determine which is most appropriate you know what lot sizes are on offer and how to trade with them.

The micro lot

The micro lot is the smallest of the different lot sizes.  It is available via forex brokers and holds 1,000 units of currency.  This means that if you are trading with British pounds in your trading account the micro lot will consist of £1,000.  This micro lot is recommended for the new trader as the smaller size ensures that you won’t face account depletion if you lose a trade.  It also reduces the amount of risk on a trade.  When trading with micro lots you will see a single pip equal 0,1 units of your trading account currency.

The mini lot

Before the introduction of the micro lot the mini lot was the most popular choice for beginner traders.  These lots are ten times larger than micro lots presenting with 10,000 units of currency.  This means that each pip in a mini account has a value of 1 currency unit.  The mini lot is no longer the recommended option for new traders, however if you have a large amount of capital then you should consider looking at this lot.  The start up amount for this type of lot is 2,000 currency units.

Mini lots present with a great amount of risk, much greater than that of the micro account.  The reason for this is that the market moves around 100 pips per day.  This means that on one trade you may be risking 100 units of your account currency.  This sort of loss can be detrimental to any new traders who do not have large trading funds.

The standard lot on the foreign exchange Sydney market

The standard lot is the largest of all three options available.  You should only considering trading with these lots if you have experience on the foreign exchange Sydney market.  You will also need a large account balance as the start up capital required is around 25,000 units of currency.  If you do not have this amount in your trading account you will be required to use leverage when executing trades.  Leverage increases the risk of a trade which can be detrimental when using a standard lot.

The size of a standard lot is much bigger than the mini and micro lot as it holds 100,000 units of currency.  A single pip in this lot is equivalent to 10 units of currency.  This means that you could lose a minimum of 100 units if the market moves 10 pips.

 

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How to Cope With Foreign Exchange Sydney Losses

Coping with Foreign Exchange Sydney Market Losses

There is one thing on the foreign exchange Sydney that is guaranteed.  This is that you are going to make a loss at some point on the market.  There are no traders who can honestly say that they have never made a loss when trading.  While some of these losses are going to be small there are others that will be larger.  It is important that you know how to cope with the losses that you make on the foreign exchange Sydney.  There are a number of things that you should consider including the size of the loss, the time you take from the market and the reason for the loss.

The Size of the Foreign Exchange Sydney Loss

The first point you have to consider when you make a loss on the market is the size of the loss.  All losses that you make should be kept to a certain size.  This maximum size will be the maximum loss per trade that you have set.  Most traders will have this set at 2% of their trading account balance.  However, there are some traders who look at setting this at 1% of their trading account balance.  If you have lost more than this amount you have to consider why this is.  If you have made this maximum loss you should consider this to be a big loss on the market.  If you have made very little in the way of loss then it is a little loss.

Taking Time From the Market

When you make a loss on the market you have to consider taking time from the market.  The greater the loss on the market the greater the need to take time should be.  Taking time from the market allows you to calm your emotions and to settle your mind.  When you don’t do this you are more likely to give into trading that is emotionally based.  The most common trading that you could fall into will be revenge trading.

The amount of time you take from the market should be in line with the loss that you have made.  If you have made a very small loss then you should consider taking 5 minutes from the market.  However, if you have made a large loss on the market then you should look at taking a little longer.  You should never take a very long time from the market because this could impact the other trades that you have open.

Analysing the Loss

Once you have taken the time away from the market you can continue to trade.  At the end of the day you should analyse why you made the loss.  When you do this you can determine whether it was the result of unexpected movement on the market or if you did something wrong.  If you have done something to cause the loss you need to be honest about this.  When you are honest about the mistake you can work toward avoiding it in the future.  You can also see if there are any weak points in your trading that need to be remedied.

 

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Retail Sales And Its Effect On Foreign Exchange Rates

Foreign Exchange Rates and Retail Sales

The Retail Sales report is normally very closely monitored by investors, traders and economists.  It relates to the total sales value of the retail sector.  The figures it produces are related to sales figures obtain from a sampling of businesses that are involved in the sale of consumer goods.  The data includes that taken from businesses that operate from fixed business premises, as well as vending machines and mail catalogues.  The size of the business is irrelevant to the report.

The report is normally released to the public mid-month and the data relates to the previous month.  Traders in the forex market have an interest in this report because it often acts as an indicator of the increase or decrease in the inflation rate which is an important factor in the forex market.  There are two main sections that make up the report.  The first is a total sales figure as well as a percentage change in figures compared to the previous period’s figures.  The second is a figure excluding the automobile sales figures.  This is done because the high price levels of automobiles could provide a distorted sales figure.

What is the Effect of Retail Sales on Foreign Exchange Rates?

In the past, the release of this report has been known to cause increased volatility in the forex market.  It indicates inflationary pressure that could prompt investors and traders to make adjustments to their portfolios.  In the event of a rapid increase in the retail sales figures in the midst of a business cycle, a country’s central bank may make the decision to increase its interest rate.  This will be done as a short-term measure to curb a possible inflation rate hike.  This could affect your forex trade in an adverse manner, depending on the trade type you have entered.

In the event that the figures show a slowing down or stagnation of retail sales, it could be seen as an indication of a slowdown of consumer spending.  This could imply that a recession is looming as consumer spending is an important factor in a country’s economic health.  In this case, traders could profit by making the most of this decrease in foreign exchange rates.

You should remain alert to the variance between the figure that is finally reported and the consensus figure.  The financial markets hate surprises, so when an actual figures is higher than what was expected, even if there is no clear sign of a possible problem, investors could start selling off parts of their portfolios.  This may include the currency section which is normally done in an attempt to avoid the outcome of a high inflation rate.

Benefits and Pitfalls of the Retail Sales Report

Benefits

  • The data is made available in a timeous manner, normally two weeks after the period it refers to
  • A revised report is normally released a short while after the initial report
  • Adjustments are made for seasonal and holiday variances
  • Forex traders can access historical data which offers them the opportunity to do trend calculations

Pitfalls

  • The reported figures are based on value and no inflation is worked into the calculations.  This makes it difficult for traders as they have to base their calculations and decisions on raw data
  • The revisions are often quite large and the store sampling is quite small relative to the actual numbers of retailers
  • The report does not take into account services in the retail market.  The figures that are produced are based on physical goods only

 

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3 FX Concepts To Master To Beat The Market

There are certain concepts that are crucial to adopt when FX trading. A lot of inexperienced traders have their equity totally wiped out before they truly begin to get a firm grasp of successful and consistent FX trading. In this article, we’ll look at 3 key concepts every trader must give the nod to before they can expect to see a P/L statement that’s plump and in the black.

FX Trading Concepts Every New Trader Should Master Before Risking Their Equity

1. The Technical Analysis Concept. If for whatever reason you’re unwilling or unable to embrace technical analysis, walk away now. Just pick up your pot of capital, turn around, and walk out the door. No one will judge you. The fact is, trying to trade FX without a commanding and working knowledge of technical analysis is like trying to perform heart surgery with two hooks for hands. You’re going to make a total hash of it. Technical analysis is what allows astute traders to spot price trends, and then ride those price trends all the way to the bank. Technical analysis is what enables traders to spot meaningful price patterns that happen countless time within the FX universe – patterns that can have the pips squeezed out of them like the juice from a ripened orange. As far as understanding the pulse and direction of the market goes, technical analysis is what you need – some might even say, it’s all you need.

2. Risk Control. When you trade FX, preserving your hard won equity is the first order of the day. Without it, there may as well not be any market. Like a knight in shining armour, risk control is the concept that is your equity’s staunchest guardian. Wise risk management will ensure that your trading positions are always perfectly balanced, offering adequate rewards for any risk placed. Wise risk management is also about ensuring that any one open position cannot threaten more than the tiniest smudge of your total equity. Despite its virtues within FX trading, many new traders will often not provide more than a passing thought towards risk control when they begin trading. Sooner or later, this sparse detail to risk attention will tragically have them paying with large chunks of their trading capital. It’s really better to get on top of risk control early on in your FX trading career.

3. Zen & Psychology. Calm traders who can take whatever the markets throw their way somehow always profit faster and fatter than those who don’t. Mastering your own emotions remains one of the softer trading skills that can also be the most difficult to get right. It isn’t easy to turn your back on greed, as it flashes a wad of cash at you 50 pips beyond your take profit target. Nor is it easy to stand toe to toe with fear – trying to stay true to your trading ideals and system after the markets have been cruel and unforgiving over a succession of recent trades. However, by adopting an almost Zen like acceptance of the occasional loss, we place ourselves in a better frame of mind to make the right calls to get our winning streaks back. FX trading is never smooth, and nor should we expect it to be.

We have not touched upon specific trading strategies or a single FX indicator in this article – however, these three trading concepts are as important as any when it comes to attaining ultimate FX trading success.

 

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A Guide To Trading Foreign Exchange Rates

Whether you wish to trade foreign exchange rates as a portfolio staple, or as a form of diversification, you must first understand what makes the currency markets move. In this article we’ll provide a brief foundation of knowledge about trading foreign exchange rates.

A Quick Guide To Trading Foreign Exchange Rates

Is Trading In Foreign Exchange Rates Risky? All investment forms are risky to some degree. All investment vehicles require a strong base of knowledge as well as a plan to trade successfully. The currency markets are no different. The amplified leverage often associated with trading foreign exchange rates can amplify risk (and reward) somewhat – however the basics still apply here, as they do with trading any and all asset classes.

Clear Trend Identification Is Possible. One of the most key skills that traders in any asset class must pick up is that of trend identification. Within currency markets, technical analysis is more defined and brings better results than when applied to various other asset classes such as stocks or bonds. Consequently, trend traders can often see the best results when they ply their skills to foreign exchange rates trading as opposed to other asset classes.

Advantages In Trading Currency Compared To Other Asset Classes. Currency trading has achieved a lot of recognition in the post internet era. While only a couple of decades ago, currency trading was a reserve for those with high net assets, this is no longer the case – in fact, the emergence of foreign exchange trading into the mainstream has meant that new traders can get cracking with as little as a couple of hundred of bucks in equity. The reason for the proliferation in amateur currency traders can be attributed to the following benefits that it offers:

  • 24/7 Markets – On weekdays, the markets are open pretty much 24/7. This means no matter what your situation, the markets will yield to your schedule and be available for you to open your positions.
  • High Liquidity – We’re talking about a monster financial market that trades to the tune of an estimated $3 trillion every single day. This huge liquidity brings many benefits – there is always someone to take the opposite side of your trade, which means spreads are low. The high volume of trades also reduces the possibility of evil market makers playing games with price action, and there is more volume stability and less price gapping than is often seen with stock trading.
  • High Leverage. To encourage traders with lower capital outlays, brokers offer highly leveraged accounts allowing traders to control position sizes hundreds of times their capital stake.
  • Cheap. As it stands, currency trading involves the lowest cost compared to any other asset class. Most brokers only charge a modest pip spread (sometimes a pip or less for the most liquid currency pairs). It means traders can keep more profit for themselves.

Factors That Move Currency Pairs. While there are a wide confluence of factors that will ultimately set rates, there are a few broad things that can move markets with real gusto. The fundamentals behind currency movement between a currency pair will include relative interest rates, relative economic strength, political stability and other factors such as the trade deficit. This is why news releases relating to any of the factors above often cause tremendous movement within the currency markets.

 

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5 Key Foreign Exchange Trading Concepts

There are certain concepts and ideologies that all foreign exchange traders must understand and embrace before pitting their equity against the markets. We examie a few of these concepts today in explicit detail.

Key Foreign Exchange Trading Concepts

1. Within Foreign Exchange Trading, Longer Timeframes Wins. Always keep this in mind when preparing your trading set-ups. No matter what you might see on the shorter time frames, the true story is always on the longer time frames. This is where you will find the underlying trend. This does not mean you have to stick with the daily chart when making your decisions – rather use the longer time frame charts to gain a wider perspective for your shorter term trades. There are benefits to be had from shorter time frames too – you can weave in and out of a trade in a single session…ideal for day and swing traders. However, remember that shorter time frames are also fallable to more whipsaws and false signals.

2. Foreign Exchange Momentum Can Be Like A Charging Freight Train. Momentum is a key concept to lap up for those studying foreign exchange trading. Momentum can be unstoppable – lingering on and on, when when price finds itself in savagely overbought or oversold territory. Understanding momentum within foreign exchange trading allows us to ride with it, rather than position against it – stranded haplessly as it box punches our stop loss to the ground.

3. Divergences Are Powerful Observations In Foreign Exchange Trading. A divergence between an indicator and price action can be one of the most powerful sights to behold on your trading platform. Divergences occur when price action behaves in one way, but indicators behave in an opposite way. For example, in an uptrend, price makes higher highs but a key indicator such as the MACD or Stochastic makes lower highs. Often a divergence such as the one just described will cause price to follow the indicators lead and reverse its trajectory.

4. RSI Trendline Breaks Lead Price Trendline Breaks. Most foreign exchange traders use price trendlines in their trading. Did you know that an interesting little quirk of the RSI indicator is that it often experiences a trendline break in advance of a price trendline break? A powerful concept when applied to ones trading.

5. Technical Analysis In Currency Trading Is A Self Fulfilling Prophecy. Many people believe technical analysis works because millions of traders see the same chart patterns at the same time, and interpret them in the same way. Hence price will tend to behave in the way that is dictated by this collective. Either way, it works!

 

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5 Winning Foreign Exchange Rates Trading Strategies

Successful foreign exchange rates trading requires the use of powerful strategies that can overcome the odds that are stacked against the private trader. By mastering the “M’s” of Mind, Money Management and Methodology, everyone – yourself included – can find consistent profits through currency trading.

In this article, it’s that final M we will dissect – methodology – or put another way, the various trading strategies that can bring you success when trading foreign exchange rates.

5 Potent Strategy Types For Trading Foreign Exchange Rates

Trend Strategy – Always trade with the trend, as countless currency trading journals and gurus have been spouting endlessly since the very earliest days of technical analysis. When you develop a trend strategy, you’re building a system that is able to pinpoint the start of a new trend very early on in its formation. Experience will teach you quickly that more often than not, the earliest stages of a new trend will be where a LOT of the price movement will be made. Miss it, and you may just have missed the boat. Easier said than done of course – as a trend trader, you’ll have to balance getting into supersonic new trends fast, while trying to steer clear of fake trends, when price action feigns to start something new and bold, only to whipsaw back to an old trading pattern. Many trending indicators and tools can help traders pick out genuine trends while avoiding the imposters.

Trading Foreign Exchange Rates With A Sentiment Strategy – At its very core, the market price and its movement is nothing more than aggregated sentiment. Opinions are what drive prices. Opinions, and other emotions such as fear and greed. Therefore, getting a feel for market sentiment is important, and traders should try and incorporate market sentiment within their overall trading blueprint. One of the best tools to pick out market sentiment is the commitment of traders (COT) report which essentially tells us what type of trader is taking what type of position.

Breakout Strategy – Trading foreign exchange rates breakouts can be tricky. Simply because a large number of breakouts end up as fakeouts – failed breakouts! Using the right blend of indicators can help guide a trader into a genuine breakout play while avoiding fakeouts like the plague. The big plus with successful breakout trading is that it enables a trader to capture the bulk of the pips spat out by a fast and furious breakout. Understanding telling chart patterns and using aids like the Bollinger Bands will help traders unveil potential breakouts just as they’re getting ready to make their price dash.

News Strategy – Not for the weak hearted certainly, trading the news is the domain of nimble, highly skilled traders who thrive upon the often illogical and overstretched reaction that price has to news. This type of strategy feeds on the volatility spike that news brings to the market.

Ranging Strategy – For vast periods in a currency pairs life, price action will actually be ranging rather than trending. A range strategy can be quite placid and simple most of the time – the trader identifies a currency pair trading within a range and opens positions during overbought and oversold price regions. Identifying key support and resistance areas are the key to this strategy, and tools such as the Relative Strength Index (RSI) and the Stochastic can be useful in identifying overbought and oversold regions.

 

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How To Read FX Quotes

If you’re new to the dynamic world of FX trading, you may wonder how it all works. In this article we’ll go over the basic mechanics of a simple FX trade, including some commonly used terminology that you may find useful as you explore more about currency trading.

A Quick Guide To Reading The FX Quotes

Reading An FX Quote – An FX price will always have two components. The first currency, and the currency it is being compared against. For the sake of this article, let’s presume that EUR/USD is trading at 1.35. This is telling us that for every 1 Euro, the market will give us 1.35 US Dollars. If on the other hand we wanted to check how many Swiss Francs we could get for a Pound, we would check the GBP/CHF rate – and so on.

Before going onto reading an FX quote, let’s talk about the terminology of ”long and short”. When we go long on a currency, we are buying that currency. We believe that the currency will strengthen against the other currency in the pair. Conversely, when we go short on a currency, we are selling the base (first) currency in the quote. Our belief is that the currency will weaken from this point on.

When you read an FX quote, the first currency is called the BASE currency while the next currency you see is called the COUNTER currency. As such your action as a trader will always be related to the base currency. So, when you believe that the Euro is weakening against the US Dollar, you would want to short EUR/USD – so you would want to SELL the Euro while BUYING the Dollar in return. If you believe that Sterling is about to strengthen against the Swiss Franc, you would want to go long on GBP/CHF. You would be buying the Pound, against the Franc.

Therefore, when you sell a currency pair (go short), you would subsequently want the price on that currency pair to fall. You would want the base currency to weaken against the counter currency, and the bigger the tumble the better while you’re in the trade. When you  go long on a currency pair (buy), you would want that currency pair to rise after you open your trading position. The more it surges while you have a position, the more profit you’ll earn from it.

How Can You Sell Currency You Don’t Even Have? You might wonder, how can you go short on a currency that you do not even own. When you trade FX, you’re merely speculating in how rates will change. You can therefore short any currency quoted on your brokers trading platform – essentially you borrow the currency and sell it on to another party, and buy it back at a lower price (assuming the currency does in fact weaken as you anticipated).

What Is A Pip? This is simply the smallest measure of price movement, and so represents a single unit of profit. Most currency pairs will be quoted to four decimals – each unit of movement on that fourth decimal is a pip. So, if EUR USD is quoted at 1.3510 and within the day moves to 1.3550, there has been a movement of 40 pips. If you had traded at $1 per pip in favour of a stronger Euro, you would have made a $40 profit.

Getting to know the FX market can seem a little daunting at first because of the vast amount of terminology involved. However, once you absorb the basics, trading the FX can be a rewarding and exciting experience.

 

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A Newbies Introduction To Foreign Exchange Trading

The foreign exchange market (also commonly known as forex) is one of the biggest in the world. It courts in the region of $4 Trillion in transactions each and every day. To put this in some perspective, by comparison, the global stock market transacts roughly $84 Billion each day – a mere dwarf when standing toe to toe with the monster that is the foreign exchange market.

This article offers a gentle smattering of light facts, figures and concepts to welcome the newcomer to the world of foreign exchange trading.

Foreign Exchange Trading – A Newbies Welcome

1. Who Uses The Foreign Exchange? The currency markets are used by many different stakeholders. Anytime that you go on holiday abroad, you almost certainly will need to buy holiday currency to spend at your destination. You will need to access the foreign exchange to buy this money. Similarly, businesses and governments use the currency markets to purchase commodities on a huge scale. The forex is in fact what makes international trade and commerce possible.

2. How Do Ordinary People Make Money Trading Currency? Many part time and full time traders use the currency markets to speculate on prices. These individuals are attracted by the many benefits that currency trading offers – a liquid market that is open 24/7, cheap fees and the possibility of trading with a very low capital outlay. Most private traders use “technical analysis” in order to analyse markets and predict likely price movement. Happily, technical analysis can be free to learn and to use. There are many free resources teaching the basics of technical analysis, as well as free trading platforms such as the MetaTrader4 which come with a wide berth of technical analysis tools. Good traders combine their knowledge of technical analysis within a solid trading plan, which helps them to make accurate and sensible trading decisions even in choppy markets.

3. What Makes The Price Of A Currency Pair Move? Ultimately, a currency will rise or fall in strength based on it’s supply and demand against another currency. There are many fundamental factors that will forge the strength of a particular currency.

Switch onto any financial TV program and you might hear something along the lines of “…And the Pound slid in trading today against the US Dollar on the back of poor unemployment numbers”. The underlying strength of an economy is simply one of many factors that impact on exchange rates. Poor unemployment figures are a sign of a faltering economy, which is why in the above example the Pound took a bit of a slugging against the Dollar. It most likely also dropped in value against a basket of other currencies. Just a clasp-full of other fundamentals that can affect the strength of a currency include inflationary news, base rate announcements by central banks, GDP numbers, quantitative easing programs and more. When major news on these factors are announced, exchange rates can often get extremely volatile.

4. What Are The Bulls And Bears? Bulls and bears are simply expressions used to depict rising or falling markets. So, when you hear that the Pound is bullish against the Euro, it simply means the Pound has been gaining in strength against the Euro. Should the Pound be said to be bearish against the US Dollar, it simply means the Dollar has been strengthening against the Cable.

 

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3 Ways To Improve Your Forex Trading Within 24 Hours

Don’t you just love quick wins? Simple things that are fast and easy to implement, yet can bring about tremendous improvements? We do – and that’s exactly why we’ve written this blurb. You’ll find three easy yet fast ways to make your forex trading that little bit stronger – by this time tomorrow.

3 Quick Wins For Better Forex Trading

1. Swat Up On Chart Patterns – As far as profitability through simplicity goes, there can probably be no better start than by studying chart patterns. Many forex traders have a rather loose understanding on some chart patterns – however, learning the various patterns intimately, including likely price action following their formation is liable to make you into a far stronger forex trader. Chart patterns can be learned with some intense study within a few hours – while you do read about them, pull up a random forex chart and see if you can spot any patterns. Practice makes perfect when studying forex patterns, and often you need to use a little flexibility when interpreting patterns – they are unlikely to look quite as perfect as the pencilled illustrations in your textbook. Start by learning the following patterns:

  • Double tops & double bottoms
  • Head and shoulders (including inverse)
  • Rectangles
  • Wedges
  • Triangles
  • Pennants

2. Understand The Many Intricacies Of Japanese Candlesticks – The consensus among most successful forex traders is that Japanese Candlesticks are by far the most powerful way to display price action. Traditional bar and line charts do not come anywhere near providing the same detailed level of price insight as candlesticks do. However, many inexperienced traders while using candlesticks rarely pick up on the many price action clues that they provide. They are like treasure seekers, trying to find gold with a metal detector that isn’t even switched on! Getting to know candlesticks intimately can be a real quick way to improve your forex trading quickly. Just as chart patterns give us important hints on potential price reversals, continuations and consolidations…the candlesticks also drop many clues as to market sentiment. Learning about the countless different bullish and bearish candlesticks will be a day well spent.

3. Learn About Divergence. As far as single strategies go, divergences are about as strong as they get. Divergences can warn us of trend changes with seething accuracy, and in advance of price action even throwing a wobble. There are two major divergence types within forex trading – hidden divergence and regular divergence. Regular divergence helps us to spot potential forex price trend reversals. In an uptrend, regular divergence is seen when price action maintains the trend by creating higher highs, but a key indicator (for instance RSI, Stochastic or MACD) makes lower highs. Normally, when all is well within an uptrend, we would expect both price action and the indicator to both clock higher highs. With the regular divergence seen above, we would expect price action to reverse and to follow the indicator by falling. In contrast hidden divergence can be a powerful trend continuation signal. Spending a day learning about divergences, and trying to spot them on real charts can be time very well spent.

So there you have it – three very simple yet powerful things that you can learn within a day, that are liable to greatly improve your forex trading profits.

 

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